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ACCC priorities for 2016: fines, farmers and more studies

It will be very interesting to see how the first criminal cartel prosecutions unfold and whether any successes in achieving larger fines in competition cases change the ACCC's approach to bringing and/or settling enforcement actions.

The ACCC's enforcement priorities for the year ahead, announced yesterday by ACCC Chair Rod Sims, offer some interesting refinements on previous focus areas:

higher fines for cartels and anticompetitive arrangements: the ACCC may seek larger penalties in this area and may bring the first criminal cartel case this year;

agriculture will be thekey sector focus: a market inquiry into the competitiveness of agriculture supply chains will be held under the guidance of newly appointed agriculture Commissioner, Mick Keogh; and

on the consumer side, the ACCC will be refocusing on consumer guarantees this year, particularly in the car retailing space. It will also prioritise the protection of Indigenous, elderly and other vulnerable consumers (such as new arrivals to Australia).

The first criminal cartel cases?

Cartels remain the ACCC's leading focus, and it reportedly has 20 cartel investigations under way. Importantly, the ACCC has signalled that the first prosecutions under the criminal cartel provisions (which came into force in 2009 and have not to date been effectively applied) may commence this year.

Mr Sims has noted that the ACCC is seeking significant penalties in some of its current cases, including the long-running Cement Australia case, in which the ACCC had a partial victory. The ACCC is seeking a large penalty in Cement Australia, and if it achieves this goal, along with the substantial turnover based fine handed down in Visa, it will have major implications for the level of agreed penalties the ACCC is willing to accept to settle actions, or the ACCC's willingness to settle proceedings at all.

Finally, the ACCC has targeted further conduct against unions, and says it has a substantial number of investigations running currently.

The ACCC Chair said that market studies have not been used as frequently as they might have been in the past, and noted that international regulators use this type of enforcement activity more regularly (for example the EU Commission, which has run a similar inquiry into online content distribution recently).

A market study involves a long-running investigation into a sector (not a particular business or entity) pursuant to which the ACCC can use its compulsory powers to collect information and assess in its opinion whether the market structure results in an effective or competitive market outcome. The ACCC can use these powers to identify what it or other agencies can do to improve those outcomes.

The ACCC clearly would like to pursue more of this kind of investigatory work, and has announced it will conduct a market study into agriculture. This will be looking to understand and consider the competitiveness of various agricultural supply chains, a goal driven by a recent Government White Paper which identified issues with consolidation and competitiveness in supply chains for food products. A new Commissioner, Mick Keogh, was appointed the day after the Chair's speech; he will oversee a dedicated ACCC unit on agriculture.

There will also be a market study into regional petrol pricing in Launceston and Armidale, following on from a similar market study which found a market failure and high profit margins on fuel in the Darwin region.

In April, the ACCC will also report on the inquiry into Australia's East Coast Gas Market. This inquiry has been running for a year and has considered whether the domestic gas market is functioning correctly, given the increase in export gas delivered to Queensland-based LNG export locations and the potential risks of domestic gas shortages and price increases. It has generated significant comment from interested parties and ran against the background of the Royal Dutch Shell/BG Group transaction which the ACCC did not oppose. Those in the Australian manufacturing community dependent on gas supply will be eagerly awaiting the outcome.

Protecting certain types of consumer a priority

The ACCC has elevated Indigenous consumer protection to an enduring priority. This is a significant change and notes the challenges some Indigenous consumers face, particularly in remote areas, from unscrupulous selling practices.

Further, given the aging population and continued high immigration levels, the ACCC will also prioritise the older and more vulnerable Australian consumer. The ACCC is investigating issues relating to the sale of hearing aids, and misleading and deceptive statements about adjustable beds and mobility equipment.

The ACCC has also recently won a case where a business had made systematic misleading representations to new migrants, who were told they would obtain sponsorship or permanent residency if they worked for the company (provided they paid significant sums to do so).

Consumer guarantees

The ACCC will continue to protect consumers' rights to repair, replace or, if there is a major failure, obtain a refund for faulty products, particularly to ensure consumers are aware that the law may protect consumers beyond the manufacturer’s warranty period, without the purchase of an extended warranty. Mr Sims highlighted the risks of making blanket refusals or misstatements as to warranty claims without considering the application of the consumer law, referring in particular to the recent Fisher & Paykel case and the LG Electronics action.

The ACCC will be looking particularly closely at consumer guarantees in the new car sector.

The health and medical sectors

The health and medical sector was an ACCC priority in 2015 and is on the radar again in 2016. One significant success in 2015 was its action against misleading conduct in relation to Nurofen pain relief products (which were each said to be formulated to treat a specific type of pain, when in fact the products were identical).

The ACCC is going to look at the private health insurance industry this year, specifically to consider whether policy information is as complete as possible and/or is not misleading.

It will also focus on misleading health claims in relation to certain food products, and it has some well-advanced investigations in this area.

Small business, big business, and bargaining power

The ACCC is going to focus on big business this year, because the conduct of larger businesses can have a more material market impact and larger businesses should be the standard bearers for good corporate conduct.

Following on from its successful case against Coles, we think this will play out in the ACCC taking more cases where there is a disparity in bargaining power between market players, particularly smaller suppliers and larger acquirers of goods or services.

However, the ACCC is going to slightly change tack this year, and focus on how the larger businesses comply with Codes of Conduct. In relation to "concentrated industries" (which is ACCC shorthand for supermarkets, among other sectors) the ACCC will look to ensure compliance with the relatively recent Food and Grocery Code of Conduct. The ACCC flagged a general approach to review compliance with, among others, the Franchising Code of Conduct and the revised Horticulture Code of Conduct.

In November this year, new laws protecting small businesses from unfair terms in standard form contracts take effect. The ACCC will be looking to educate small business in relation to their rights with respect to the imposition of standard forms of agreement by larger operators.

Conclusions

Recently, the ACCC has had some success in the consumer law space, but relatively fewer successes on the competition side. Accordingly, it will be very interesting to see how the first criminal cartel prosecutions unfold and whether any successes in achieving larger fines in competition cases change the ACCC's approach to bringing and/or settling enforcement actions.

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